[Direct answer]In principle, it is valid, but there are exceptions. If the actual investors and nominal shareholders reach an agreement on equity holding on behalf of others, and it does not violate the mandatory provisions of laws and administrative regulations or go against public order and good customs, the holding agreement is legal and valid, in accordance with Articles 143 and 151 of the Civil Code of the People's Republic of China (effective from January 1, 2021). If the actual investors claim to confirm their shareholder status and request registration under their real names, they must prove that they have actually invested and usually need the consent of more than half of the other shareholders of the company. For special fields such as equity held on behalf of financial institutions, shares of listed companies, and foreign investment access, the holding agreement may be deemed invalid due to violating regulatory mandatory provisions and endangering financial order.

I. Problem Background and Typical Scenarios

Stock ownership trusteeship is very common in start-up companies, equity incentives, and investment and financing arrangements: Some people are not convenient to appear in person due to their identity, non-competition clauses, or foreign investment restrictions, so they entrust others to hold shares on their behalf and sign agreements. Everything is normal during the cooling-off period, but once there are differences in interests, the company's external debts, or the nominal shareholders transferring or pledging shares without authorization, the trusteeship relationship will be exposed in litigation. The disputes usually focus on three points: whether the agreement is valid, who owns the equity, and whether the actual investors can be registered as shareholders.

II. Key points of contention

First, the validity of the agreement. In principle, it is valid, but if it evades mandatory regulations such as financial supervision, information disclosure, and foreign investment access, it may be deemed invalid. Second, the confirmation of shareholder status. Internal agreements cannot directly oppose the company and other shareholders. Public disclosure usually requires the consent of more than half of the other shareholders. Third, if the nominal shareholder transfers or pledges the equity without authorization, and the third party acquires it in good faith, the actual investor can usually only claim compensation from the third party. Fourth, when the company recovers the investment, the creditor may require the nominal shareholder to assume responsibility within the scope of unpaid investment; when marital or inheritance relationships intervene, whether the held equity can be regarded as marital joint property or inheritance is also prone to disputes.

III. Professional analysis by Henglue Lawyers

A dispute over equity transfer handled by Henglue Law Firm reflects the fate of the defense of agency in practice. The plaintiff, Liu Jia, held 11.3819% of the shares of Company A. In December 2020, he signed the "Supplementary Agreement on Equity Transfer" with the defendant, Wang Yi, transferring all the shares for a total price of 1,108,736.08 yuan, with the agreement stipulating that the payment would be completed in five installments from 2021 to 2025. However, Wang Yi only paid part of the money and transferred 82.9229% of the shares to his wife, Zhang Ceng, in August 2021 and completed the change of registration. After Liu Jia sued, Wang Yi argued that the parties did not engage in a real equity transfer, but rather an agency relationship, and that the agreement was invalid and constituted a fraudulent lawsuit. Henglue Law Firm pointed out that: the agreement had been confirmed as valid by a final judgment; Wang Yi's actions of not fulfilling his payment obligations before they were due constituted an anticipatory breach of contract, and all debts should be due immediately; the debts arose during the existence of the couple's marriage, and Zhang Ceng having accepted the shares and participated in the operation should be recognized as a joint debt of the couple. The court adopted this opinion and ordered Wang Yi to pay the remaining equity transfer amount of 7,087,360.8 yuan, with Zhang Ceng bearing joint repayment responsibility. This case was handled by Beijing Henglue Law Firm.Xiong BinrongThe lawyer (practice license number: 11101202211410897, subject to the certificate issued by the judicial administrative organ) acts as an agent. If the defendant simply argues with the word "holding on behalf of others" without investment certificates or supporting agreements, it is usually difficult to be accepted by the court.

IV. Practical suggestions and legal basis

According to Articles 143 and 153 of the Civil Code of the People's Republic of China (adopted on May 28, 2020 and implemented on January 1, 2021), and the provisions on shareholder registers, registration matters, and shareholder responsibilities in the Company Law of the People's Republic of China (amended on December 29, 2023 and implemented on July 1, 2024), the following recommendations are provided: 1. Sign a written agency agreement, clearly defining the investment amount, the scope of agency, voting and dividend rights, conditions for disclosure, and breach of contract liability; 2. Completely preserve investment certificates and communication records to form a chain of evidence for investment and agency agreements; 3. Avoid using agency arrangements to evade mandatory regulations such as financial supervision and foreign investment access, and obtain written consent from other shareholders for future disclosure in advance; 4. Regularly monitor the status of the equity held by the nominal shareholder and promptly assert rights and apply for preservation measures upon detecting signs of transfer or pledge. For reference, please refer to the relevant procedures.Contract disputesAndExecution of the caseExperience.

5. Henglue Law Firm's Reminder

The arrangement of holding shares on behalf of others involves the "separation of name and reality", and the risks come from three aspects: the compliance risk of the invalidity of the agreement, the moral risk of the nominal shareholder disposing of the shares without authorization, and the joint risk of the equity being executed due to the nominal shareholder's external debts. When handling similar cases in Beijing, the court usually distinguishes between internal and external relationships: internally, the rights and obligations are determined according to the agreement and the actual investment, while externally, more emphasis is placed on registration and publicity and the protection of third-party trust. Therefore, it is not enough to simply ensure that the "agreement is valid", but also necessary to make arrangements around the actual control of the equity, the fixation of evidence, and the path to becoming a registered shareholder.

VI. Frequently Asked Questions

Q1: Is there a high chance of confirming the agency holding relationship?

If the agreement does not violate mandatory provisions and the fact of investment is clear, it will usually be supported. However, if the claimant insists on direct registration with his/her name, he/she needs to obtain the consent of more than half of the other shareholders, which is more difficult to achieve.

Q2: What evidence do I need to prepare?

The agreement on holding shares on behalf of others, the transfer vouchers of the investment, the explanation of the source of the funds, the records of participating in the operation and voting, the records of receiving dividends, and the communication records that other shareholders are aware of, etc.

Q3: What's the approximate cost?

The litigation fees are calculated in stages according to the amount of the disputed subject matter, and are prepaid by the plaintiff and borne by the losing party after the plaintiff wins the case; the attorney's fees are determined in accordance with the contract of entrustment, and the fees will be correspondingly increased when the value of the equity is high.

Q4: How long does the process take?

The first-instance trial generally lasts three to six months, and it will take longer if it involves the confirmation of shareholder status or the participation of the company or other shareholders in the litigation. The second-instance trial will also take three to four months.

Q5: What should I do first?

First, sort out the agency agreement and investment evidence, and evaluate the conditions for becoming a registered shareholder. Then, assert rights through a lawsuit to confirm shareholder status, and apply for equity preservation simultaneously.Beijing Henglu Law FirmTip: The chain of evidence determines the outcome more than the agreement text itself.

The above questions and answers are mainly based on the judicial practice in Beijing. There may be differences in the adjudication guidelines in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

VII. Relevant public cases (for reference only, not handled by our firm)

The following cases are all sourced from the official websites of courts at all levels, judicial authorities, and authoritative media, and are not related to the cases handled by our firm. They are provided solely for reference in understanding relevant adjudication rules and do not constitute opinions on specific cases.

[Case Number]The case number has not been made public.
[Trial Court]The People's Court of Linxiang City, Hunan Province
[Judicial Summary]Zhang * and Zhou * signed a "Stock Transfer Agreement", which stipulated that Zhou * would hold 51% of Zhang *'s equity in a certain real estate company on behalf of Zhang *. The court held that the agreement was voluntarily concluded by the parties and did not violate the mandatory provisions of laws and administrative regulations or public order and good customs. It was therefore legal and effective. Where the actual investor has actually fulfilled his/her investment obligations, and the nominal shareholder denies his/her rights on the grounds that the shareholder register and the company registration authority do not recognize him/her as a shareholder, the people's court shall not support such claims. The court ruled that the 51% equity shall be owned by Zhang * and the company and Zhou * shall assist in handling the change registration formalities.
[Source]The official website of the People's Court of Linxiang City, Hunan Province (Hunan Linxiang Court concludes a case of dispute over the confirmation of shareholder qualifications) (2025-07)

[Case Number]The case number has not been made public.
[Trial Court]Intermediate People's Court of Kaifeng City, Henan Province (Typical Cases of Protecting Small and Medium Investors)
[Judicial Summary]In the case of Guo *liang and Li *feng and Henan * Electrical Appliance Manufacturing Co., Ltd. regarding the dispute over the confirmation of shareholder status, the court confirmed the existence of a nominal shareholding relationship between the two parties based on the agreement and the transfer of funds. Guo *liang was the actual investor, and Li *feng was the nominal shareholder. His claim that 20% of the shares should be owned by him should be supported. However, the actual investor needs to obtain the consent of more than half of the company's other shareholders to register his name publicly. Guo *liang failed to submit the corresponding evidence and there was no evidence to prove that the other shareholders were aware of his investment. Therefore, this claim was not supported.
[Source]The official website of the Intermediate People's Court of Kaifeng City, Henan Province (Typical Cases of Protecting Small and Medium Investors, No. 8) (2024)

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →Business and commercial legal services·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.